On January 30, 2020, FERC granted in part and denied in part a declaratory order petition filed by PennEast Pipeline Company (“PennEast”) requesting that the Commission interpret the scope of a natural gas pipeline company’s eminent domain authority under the Natural Gas Act (“NGA”). FERC’s order follows a September 2019 decision by the United States Court of Appeals for the Third Circuit (“Third Circuit”), In re PennEast Pipeline Company, LLC (see September 18, 2019 edition of the WER). FERC’s January 30 declaratory order agreed with PennEast that Congress intended the NGA to be a vehicle for granting condemnation authority, and therefore intended to delegate the federal government’s own exemption from state sovereign immunity under the Eleventh Amendment to a natural gas company that holds a valid, FERC-issued Certificate of Public Convenience and Necessity (“CPCN”). However, FERC refrained from deciding whether that delegation of power is constitutional. The order was issued on a 2-1 vote, with Commissioner Richard Glick dissenting on both procedural and substantive grounds.

FERC’s January 30 declaratory order (issued as a matter reserved to the agency’s discretion) holds that there is no distinction between a natural gas company’s authority to exercise eminent domain when condemning state-owned land (as opposed to private land) if the entity holds a valid, FERC-issued CPCN. FERC also noted that the Third Circuit’s opinion created significant uncertainty about the Commission’s proper role in condemnation proceedings, and explained that “[b]ased on the text of NGA section 7(h), and as confirmed by the legislative history, we believe it is evident that Congress, in delegating to certificate holders its power of eminent domain, provided broad eminent domain authority in order to achieve the objectives of the NGA without interference from states and to preserve the Commission’s exclusive jurisdiction over the transportation and sale of natural gas for resale in interstate commerce.”

FERC’s declaratory order also addressed the Third Circuit’s statement that FERC itself could file the necessary condemnation actions for state-owned property and transfer the property to the natural gas company. FERC disagreed, concluding that because the NGA confers authority to exercise eminent domain to CPCN-holders—not to FERC itself—the statute does not authorize the Commission to file such a condemnation action over state-owned property or to transfer any such condemned land to a private party.

Finally, while FERC agreed with PennEast that Congress necessarily delegated to CPCN-holders the federal government’s exemption from a state’s claim of sovereign immunity pursuant to the Eleventh Amendment, FERC declined to comment on the constitutionality of that delegation. FERC said that federal administrative agencies lack jurisdiction to evaluate the constitutionality of statutes they administer. Instead, FERC stated its belief that the Third Circuit’s decision would substantially impair its ability to apply the NGA because states would be free to block infrastructure projects regardless of any FERC finding that the project is in the public interest.

In a separate, dissenting opinion, Commissioner Glick opined that the majority’s order was insufficiently reasoned. According to Commissioner Glick, the issue which the majority confronted—the scope of the eminent domain authority provided by the NGA— is not a question that Congress delegated to FERC to decide. Commissioner Glick argued that FERC has no role in implementing or administering the NGA’s eminent domain authority, and questions about the scope of a CPCN holder’s right to commence an action in federal or state court are properly addressed in such courts themselves.

Turning to the merits of the majority’s order, Commissioner Glick stated: “I appreciate that my colleagues disagree with the conclusion reached by the Third Circuit and that some badly want to see it overturned. But that disagreement, profound as it may be, does not excuse the ends-oriented reasoning in today’s order, which is both deeply troubling and, frankly, a discredit to the agency.” Finally, addressing the adverse impacts to the natural gas industry that the majority predicted would result from the Third Circuit’s decision, Commissioner Glick suggested that the ruling could encourage pipeline developers to undertake greater efforts to cooperate and coordinate with the relevant states in siting a pipeline, and that Congress could step in to facilitate the pipeline developers’ efforts to acquire rights of way over state land if it disagrees with the Third Circuit’s decision.

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